Question

Supply Demand Cha de $2 TU Uach of the two diagrams to the right, calculate producer surplus, consumer surplus, and total surplus. Assume the curves are perfectly vertical and perfectly horizontal. How chan 50 Quantity 50 Quantity Ho cha Price per bushel Old supply $11 - - - - 14. The diagram shows the market for agricultural products. The shift from the old supply curve to the new supply curve is the result of technological and scientific advances in farming, including the production of more resilient and productive seeds. Calculate the change in consumer surplus and the change in producer surplus caused by these technological advances. Are buyers better or worse off as a result of these advancements? What about sellers? (Note that you cannot calculate consumer surplus directly with the information given in the diagram, but you don't need that information to calculate the change in consumer surplus.) New supply 5.50 :Demand 3 3.3 Quantity (millions of bushels)

Answer 1

Change in consumer Surplus (cs): CS= 0.5XBXH = (11-8)(3) + 0-5 (1-8) (33-3) = (3) (3) + 0 5x3 x 0.3 = 19.45 ] old PS = 0.5 (11-5:50] (3) = 8.25 New PS = 0.5 (8-2) (3:3) - 0.586X33 = 9.9 Difference: gig-8.25 = 1.65